“(1A)But if the tax year is a split year as respects the individual, the individual is not liable for tax under this Chapter in respect of gains arising in the overseas part of that year (subject to section 465B).”

“(aa)is UK resident but the gain arises in the overseas part of a tax year that is, as respects the person who created the trusts, a split year,”.

84(1)5Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK resident policy holders) is amended as follows.

(2)The amendments made by sub-paragraphs (3) to (6) apply to section 528 as substituted by paragraph 3 of Schedule 8 to this Act, and have effect in relation to policies and contracts in relation to which that section as so 10substituted has effect.

(3)In subsection (1)(b), for the words from “on which” to the end substitute “that are foreign days”.

(4)After subsection (1) insert—

“(1A)Foreign days” are—

(a)15days falling within any tax year for which the individual is not UK resident, and

(b)days falling within the overseas part of any tax year that is a split year as respects the individual.”

(7)The amendments made by sub-paragraphs (8) to (10) apply to section 528 as in force immediately before the substitution mentioned in sub-paragraph (2) 25so far as that section as so in force continues to have effect after the substitution.

(8)In subsection (1), for the words from “the policy holder” to the end substitute “there are one or more days in the policy period that are foreign days.”

(9)After that subsection insert—

“(1A)30Foreign days” are—

(a)days on which the policy holder is not UK resident, and

(b)days falling within the overseas part of any tax year that is a split year as respects the policy holder (if the policy holder is an individual).”

(10)35In subsection (3), in the definition of “A”, for the words from “on which” to the end substitute “in the policy period that are foreign days, and”.

85(1)Section 528A (reduction in amount charged on basis of non-UK residence of deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is amended as follows.

(2)40In subsection (1)(b), for the words from “on which” to the end substitute “that were foreign days”.

(3)In subsection (2)—

(a)in paragraph (b), for the words from “on which” to the end substitute “that were foreign days, and”, and

Finance (No. 2) BillPage 522

(b)for paragraph (c), substitute—

“(c)the deceased died—

(i)in a tax year for which the deceased was UKresident but not one that was a split year as 5respects the deceased, or

(ii)in the UK part of a tax year that was a split year as respects the deceased.”

(4)After that subsection insert—

“(2A)Foreign days” are—

(a)10days falling within any tax year for which the deceased was not UK resident, and

(b)days falling within the overseas part of any tax year that was a split year as respects the deceased.”

(5)In subsection (4), in the definition of “A”, for the words from “are days 15falling” to the end substitute “were foreign days, and”.

(2)20The amendment made by sub-paragraph (3) applies to section 536 as amended by paragraph 5 of Schedule 8 to this Act, and has effect in accordance with paragraph 7 of that Schedule.

(3)For subsection (7) substitute—

“(7)If in the case of the individual the gain is reduced under section 528—

(a)25divide the number of foreign days in the material interest period (as determined in accordance with that section, including subsections (7) and (8)) by 365,

(b)if the result is not a whole number, round it down to the nearest whole number, and

(c)30reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).”

(4)The amendment made by sub-paragraph (5) applies to section 536 as in force immediately before it is amended by paragraph 5 of Schedule 8 to this Act, so far as that section as so in force continues to have effect after it is so 35amended.

(5)For subsection (7) substitute—

“(7)If the gain is from such a policy—

(a)divide the number of foreign days in the policy period (as defined in section 528) by 365,

(b)40if the result is not a whole number, round it down to the nearest whole number, and

(c)reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).”

“(1B)If the year is a split year as respects an individual, the individual is 40not chargeable to capital gains tax in respect of any chargeable gains accruing to the individual in the overseas part of that year.

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(1C)But subsection (1B)—

(a)does not apply to chargeable gains in respect of which the individual would have been chargeable to capital gains tax under section 10, had the individual been not resident in the 5UK for the year, and

(b)is without prejudice to section 10A.”

(3)In subsection (2)—

(a)after “the year of assessment” insert “or, where subsection (1B) applies, the UK part of that year”, and

(b)10in paragraph (a), after “that year of assessment” insert “or that part (as the case may be)”.

92(1)Section 3A (reporting limits) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), after “year of assessment” insert “or, if that year is 15a split year as respects the individual, the UK part of that year”, and

(b)in paragraph (b), after “in that year” insert “or, as the case may be, that part of the year”.

(3)In subsection (2), after “year of assessment” insert “(or the UK part of such a year)”.

“(2A)If that tax year is a split year as respects the individual, the chargeable gains are treated as accruing to the individual in the part 25of the year (the overseas part or the UK part) in which the foreign chargeable gains are so remitted.”

(3)In subsection (3), after “that year” insert “or, where applicable, that part of the year”.

“(3A)Subsection (2) does not apply in the case of a participator who is an individual if—

(a)the tax year in which the chargeable gain accrues to the company is a split year as respects the participator, and

(b)35the chargeable gain accrues to the company in the overseas part of that year.”

95In section 16 (computation of losses), after subsection (3) insert—

“(3A)If the person is an individual and the year is a split year as respects that individual, subsection (3) also applies to a loss accruing to the 40individual in the overseas part of that year.”

96In section 16ZB (individual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrue), in subsection (1)(c), after “tax year” insert “or a part of the applicable tax year”.

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97(1)Section 16ZC (individual who has made election under section 16ZA and to whom remittance basis applies) is amended as follows.

(2)In subsection (3)—

(a)in paragraph (a), after “that year” insert “or, if that year is a split year 5as respects the individual, in the UK part of that year”, and

(b)in paragraph (b), after “that year” insert “or they are so remitted in that year but it is a split year as respects the individual and they are so remitted in the overseas part of the year”.

(3)In subsection (7), in the definition of “relevant allowable losses”, after “tax 10year” insert “or a part of the tax year”.

98In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), in subsection (4)(a), after “the year” insert “or if, as respects the settlor, the year is a split year, in the UK part of that year”.

“(7)If the relevant tax year is a split year as respects a beneficiary of the settlement—

(a)the amount on which the beneficiary is chargeable to capital gains tax by virtue of this section for that year (in respect of 20the settlement) is a portion of the amount on which the beneficiary would have been so chargeable if the relevant tax year had not been a split year, and

(b)the portion is the portion attributable to the UK part of the relevant tax year calculated on a time apportionment basis.”

25Trustees of a settlement

“(2DA)A trustee who is resident in the United Kingdom for a tax year is to be treated for the purposes of subsections (2A) and (2B) as if he or she 30were not resident in the United Kingdom for that year if—

(a)the trustee is an individual,

(b)the individual becomes or ceases to be a trustee of the settlement during the tax year,

(c)that year is a split year as respects the individual, and

(d)35in that year, the only period when the individual is a trustee of the settlement falls wholly within the overseas part of the year.

(2DB)Subsection (2DA) is subject to subsection (2D) and, accordingly, an individual who is treated under subsection (2DA) as not resident is, 40in spite of that, to be regarded as resident whenever the individual acts as mentioned in subsection (2D).”

(a)an individual becomes or ceases to be a trustee of the 45settlement during a tax year,

Finance (No. 2) BillPage 526

(b)that year is a split year as respects the individual, and

(c)the only period in that year when the individual is a trustee of the settlement falls wholly within the overseas part of the year.

(8)5The individual is to be treated for the purposes of subsections (4) and (5) as if he or she had been non-UK resident for the year (and hence for the period in that year when he or she was a trustee of the settlement).

(9)But subsection (8) is subject to subsection (6) and, accordingly, an 10individual who is treated under subsection (8) as having been non-UK resident is, in spite of that, to be treated as UK resident whenever the individual acts as mentioned in subsection (6).”

Definitions in enactments relating to income tax and CGT

102(1)Section 288 of TCGA 1992 (interpretation) is amended as follows.

(2)15In subsection (1), insert the following definition in the appropriate place—

““split year”, as respects an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 43 to the Finance Act 2013 (statutory residence test: split year treatment);”.

(3)20After subsection (1ZA) insert—

“(1ZB)A reference in this Act to “the overseas part” or “the UK part” of a split year is to be read in accordance with Part 3 of Schedule 43 to the Finance Act 2013 (statutory residence test: split year treatment).”

103In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), insert 25the following entries in the appropriate places—

“the overseas part

section 989 of ITA 2007”,

“split year

section 989 of ITA 2007”, and

“the UK part

section 989 of ITA 2007”.

10430In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), insert the following entries in the appropriate places—

“the overseas part

section 989 of ITA 2007”,

“split year

section 989 of ITA 2007”, and

“the UK part

35section 989 of ITA 2007”.

105In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts),

Finance (No. 2) BillPage 527

insert the following definitions in the appropriate places—

““the overseas part”, in relation to a split year, has the meaning given in Part 3 of Schedule 43 to FA 2013 (statutory residence test: split year treatment);”,

5““split year”, in relation to an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 43 to FA 2013 (statutory residence test: split year treatment);”, and

““the UK part”, in relation to a split year, has the meaning given 10in Part 3 of Schedule 43 to FA 2013 (statutory residence test: split year treatment);”.

106In Schedule 4 to that Act (index of defined expressions), insert the following entries in the appropriate places—

“the overseas part

section 989”,

“split year

15section 989”, and

“the UK part

section 989”.

Part 4Anti-avoidance

Introduction

10720This Part of this Schedule—

(a)explains when an individual is to be regarded for the purposes of certain enactments as temporarily non-resident,

(b)defines the year of departure and the period of return for the purposes of those enactments,

(c)25makes consequential amendments to certain enactments containing special rules for temporary non-residents, and

(d)inserts some more special rules for temporary non-residents in certain cases.

Meaning of temporarily non-resident

108(1)30An individual is to be regarded as “temporarily non-resident” if—

(a)the individual has sole UK residence for a residence period,

(b)immediately following that period (referred to as “period A”), one or more residence periods occur for which the individual does not have sole UK residence,

(c)35at least 4 out of the 7 tax years immediately preceding the year of departure were either—

(i)a tax year for which the individual had sole UK residence, or

(ii)a split year that included a residence period for which the individual had sole UK residence, and

(d)40the temporary period of non-residence is 5 years or less.

(2)Terms used in sub-paragraph (1) are defined below.

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Residence periods

109In relation to an individual, a “residence period” is—

(a)a tax year that, as respects the individual, is not a split year, or

(b)the overseas part or the UK part of a tax year that, as respects the 5individual, is a split year.

Sole UK residence

110(1)An individual has “sole UK residence” for a residence period consisting of an entire tax year if—

(a)the individual is resident in the UK for that year, and

(b)10there is no time in that year when the individual is Treaty non-resident.

(2)An individual has “sole UK residence” for a residence period consisting of part of a split year if—

(a)the residence period is the UK part of that year, and

(b)15there is no time in that part of the year when the individual is Treaty non-resident.

(3)An individual is “Treaty non-resident” at any time if at the time the individual falls to be regarded as resident in a country outside the UK for the purposes of double taxation arrangements having effect at the time.

20Temporary period of non-residence

111In relation to an individual, “the temporary period of non-residence” is the period between—

(a)the end of period A, and

(b)the start of the next residence period after period A for which the 25individual has sole UK residence.

Year of departure

112“The year of departure” is the tax year consisting of or including period A.

Period of return

113“The period of return” is the first residence period after period A for which 30the individual has sole UK residence.

Consequential amendments: income tax

114In ITEPA 2003, for section 576A substitute—

“576ATemporary non-residents

(1)This section applies if a person is temporarily non-resident.

(2)35Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 575 as if they arose in the period of return.

(3)A relevant withdrawal is within this subsection if—

(a)it is paid to the person in the temporary period of non-residence, and

Finance (No. 2) BillPage 529

(b)ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).

(4)A “relevant withdrawal” is an amount paid under a relevant non-UK scheme that—

(a)5is paid to the person in respect of a flexible drawdown arrangement relating to the person under the scheme, and

(b)would, if the scheme were a registered pension scheme, be “income withdrawal” or “dependants’ income withdrawal” within the meaning of paragraphs 7 and 21 of Schedule 28 to 10FA 2004.

(5)If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the person for the year of return, any relevant withdrawal within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the 15United Kingdom in the period of return.

(6)This section does not apply to a relevant withdrawal if—

(a)it is paid to or in respect of a relieved member of the scheme and is not referable to the member’s UK tax-relieved fund under the scheme, or

(b)20it is paid to or in respect of a transfer member of the scheme and is not referable to the member’s relevant transfer fund under the scheme.

(7)Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect 25of any relevant withdrawal treated by virtue of this section as arising in the period of return (or as preventing a charge to that tax from arising as a result).

“flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies;

40“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;

“the year of return” means the tax year that consists of or includes the period of return.

(10)The following expressions have the meaning given in Schedule 34 to 45FA 2004—

“relevant non-UK scheme” (see paragraph 1(5));

“relieved member” (see paragraph 1(7));

“transfer member” (see paragraph 1(8));

Finance (No. 2) BillPage 530

“member’s UK tax-relieved fund” (see paragraph 3(2));

“member’s relevant transfer fund” (see paragraph 4(2)).”

115In ITEPA 2003, for section 579CA substitute—

“579CA Temporary non-residents

(1)5This section applies if a person is temporarily non-resident.

(2)Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 579B as if they accrued in the period of return.

(3)A relevant withdrawal is within this subsection if—

(a)10it is paid to the person in the temporary period of non-residence, and

(b)ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).

(4)A “relevant withdrawal” is any income withdrawal or dependants’ 15income withdrawal paid to the person under a registered pension scheme in respect of a flexible drawdown arrangement relating to the person under the scheme.

(5)Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect 20of any relevant withdrawal treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result).

“flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies.”

11635In ITTOIA 2005, for section 832A substitute—

“832A Section 832: temporary non-residents

(1)This section applies if an individual is temporarily non-resident.

(2)Treat any of the individual’s relevant foreign income within subsection (3) that is remitted to the United Kingdom in the 40temporary period of non-residence as remitted to the United Kingdom in the period of return.

(3)Relevant foreign income is within this subsection if—

(a)it is relevant foreign income for the UK part of the year of departure or an earlier tax year, and

Finance (No. 2) BillPage 531

(b)section 832 applies to it.

(4)Any apportionment required for the purposes of subsection (3)(a) is to be done on a just and reasonable basis.

(5)Nothing in any double taxation relief arrangements is to be read as 5preventing the individual from being chargeable to income tax in respect of any relevant foreign income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result).

Consequential amendments: capital gains tax

“10ATemporary non-residents

(2)The taxpayer is chargeable to capital gains tax as if gains and losses within subsection (3) were chargeable gains or, as the case may be, losses accruing to the taxpayer in the period of return.

(3)25The gains and losses within this subsection are—

(a)chargeable gains and losses that accrued to the taxpayer in the temporary period of non-residence,

(b)chargeable gains that would be treated under section 13 as having accrued to the taxpayer in that period if the residence 30assumption were made,

(c)losses that would be allowable in the taxpayer’s case under section 13(8) in that period if that assumption were made, and

(d)chargeable gains that would be treated under section 86 as 35having accrued to the taxpayer in a tax year falling wholly in that period if the taxpayer had been resident in the United Kingdom for that year.

(4)The residence assumption is—

(a)that the taxpayer had been resident in the United Kingdom 40for the tax year in which the gain or loss accrued to the company, or

(b)if that tax year was a split year as respects the taxpayer, that the gain or loss had accrued to the company in the UK part of it.

(5)45But—

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(a)a gain is not within subsection (3) if, ignoring this section, the taxpayer is chargeable to capital gains tax in respect of it (and could not cease to be so chargeable by making a claim under section 6 of TIOPA 2010), and

(b)5a loss is not within subsection (3) if the test in paragraph (a) would be met if it were a gain.

(6)Subsection (2) is subject to sections 10AA and 86A.

(7)To determine the losses mentioned in subsection (3)(c)—

(a)calculate separately, for each tax year falling wholly or partly 10in the temporary period of non-residence, the portion of sum A that does not exceed sum B, and

(b)add up all those portions.

(8)For the purposes of subsection (7)—

“sum A” is the aggregate of the losses that were not available in 15accordance with section 13(8) for reducing gains accruing to the taxpayer by virtue of section 13 in the relevant tax year, but would have been available if the residence assumption had been made, and

“sum B” is the amount of the gains that did not accrue to the 20taxpayer by virtue of section 13 in that tax year but would have so accrued if that assumption had been made.

(9)If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the taxpayer for the year of return, any foreign chargeable gains falling within subsection (3) by virtue of paragraph (a) of that 25subsection that were remitted to the United Kingdom at any time in the temporary period of non-residence are to be treated as remitted to the United Kingdom in the period of return.

(a)30when an individual is to be regarded as “temporarily non-resident”, and

(b)what “the temporary period of non-residence” and “the period of return” mean.

(11)In this section—

35“foreign chargeable gains” has the meaning given by section 12(4);

“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;

“the year of return” means the tax year that consists of or 40includes the period of return.

10AA Section 10A: supplementary

(1)Section 10A(2) does not apply to a gain or loss accruing on the disposal by the taxpayer of an asset if—

(a)the asset was acquired by the taxpayer in the temporary 45period of non-residence,

(b)it was so acquired otherwise than by means of a relevant disposal that by virtue of section 58, 73 or 258(4) is treated as

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having been a disposal on which neither a gain nor a loss accrued,

(c)the asset is not an interest created by or arising under a settlement, and

(d)5the amount or value of the consideration for the acquisition of the asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 153(1)(b), 162(3)(b) or 247(2)(b) or (3)(b).

(2)10“Relevant disposal” means a disposal of an asset acquired by the person making the disposal at a time when that person was resident in the United Kingdom and was not Treaty non-resident.

(3)Subsection (1) does not apply if—

(a)the gain is one that (ignoring section 10A) would fall to be 15treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or part of another asset, and

(b)that other asset meets the requirements of paragraphs (a) to (d) of subsection (1), but the asset in respect of which the gain 20actually accrued or would actually accrue does not.

(4)Nothing in any double taxation relief arrangements is to be read as preventing the taxpayer from being chargeable to capital gains tax in respect of any chargeable gains treated under section 10A as accruing to the taxpayer in the period of return (or as preventing a 25charge to that tax from arising as a result).

(5)Nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made prevents any assessment for the year of departure from being made in the taxpayer’s case at any time before the end of the second anniversary 30of the 31 January next following the year of return (as defined in section 10A).”

118For section 86A of TCGA 1992 substitute—

“86AAttribution of gains to settlor in section 10A cases

(1)Subsection (3) applies if—

(a)35chargeable gains of an amount equal to the amount referred to in section 86(1)(e) for a tax year (“year A”) are treated under section 10A as accruing to a settlor under section 86 in the period of return,

(b)there are amounts on which beneficiaries of the settlement 40are charged to tax under section 87 or 89(2) for one or more tax years, each of which is earlier than the year of return, and

(c)those amounts are in respect of matched capital payments received by the beneficiaries.

(2)A “matched” capital payment is a capital payment, all or part of 45which is matched under section 87A with the section 2(2) amount for year A.

(3)The amount of the chargeable gains mentioned in subsection (1)(a) for year A that are treated under section 10A as accruing to the settlor

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under section 86 in the period of return is to be reduced by the appropriate amount.

(4)The appropriate amount is—

(a)the sum of the amounts mentioned in subsection (1)(c) to the 5extent that the matched capital payments are matched under section 87A with the section 2(2) amount for year A, or

(b)if the property comprised in the settlement has at any time included property not originating from the settlor, so much (if any) of that sum as, on a just and reasonable 10apportionment, is properly referable to the settlor.

(5)If a reduction falls to be made under subsection (3) for the year of return, the deduction to be made in accordance with section 87(4)(b) for the settlement for that year must not be made until—

(a)all the reductions to be made under subsection (3) for that 15year for each settlor have been made, and

(b)those reductions are to be made starting with the year immediately preceding the year of return and working backwards.

(6)Subsection (7) applies if, with respect to year A, an amount remains 20to be treated under section 10A as accruing to any of the settlors in the period of return after having made the reductions under subsection (3) with respect to year A.

(7)The aggregate of the amounts remaining to be so treated (for all of the settlors) is to be applied in reducing so much of the section 2(2) 25amount for year A as has not already been matched with a capital payment under section 87A for any year prior to the year of return (but not so as to reduce the section 2(2) amount below zero).

(8)In this section—

(a)“the settlement” means the settlement in relation to which the 30settlor mentioned in subsection (1)(a) is a settlor,

(b)a reference to “the settlors” or “each settlor” is to the settlors or each settlor in relation to the settlement,

(c)“period of return” and “year of return” have the same meanings as in section 10A, and

(d)35paragraph 8 of Schedule 5 applies in construing the reference to property originating from the settlor.”

119In section 96 (payment by and to companies), in subsection (9A), for the words from “which in his case” to the end substitute “for which he or she was not so resident if—

“(a)by virtue of section 10A, an amount of chargeable 5gains within section 86(1)(e) that accrued in a tax year (“year A”) to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the period of return, and”, and

15New special rule: lump sum payments under pension schemes etc

“394ATemporary non-residents

(1)20This section applies if an individual is temporarily non-resident.

(2)Any benefits within subsection (3) are to be treated for the purposes of section 394(1) as if they were received by the individual in the period of return.

(3)A benefit is within this subsection if—

(a)25this Chapter applies to it,

(b)it is in the form of a lump sum,

(c)it is received by the individual in the temporary period of non-residence, and

(d)ignoring this section—

(i)30no charge to tax arises by virtue of section 394(1) in respect of it, but

(ii)such a charge would arise if the existence of any double taxation relief arrangements were disregarded.

(4)35Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.

(5)Subsection (2) does not affect the operation of section 394(1A) (and, accordingly, “the relevant tax year” for the purposes of section 394(1A) remains the tax year in which the benefit is actually 40received).

(6)Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any benefit treated by virtue of this section as received in

Finance (No. 2) BillPage 536

the period of return (or as preventing a charge to that tax from arising as a result).